Category: Business

Introduction and Overview

Fix Auto is an auto body repair company based in Montreal, Quebec that is looking for rapid worldwide expansion. Fix Auto operates within an external task environment which has many opportunities but also many threats.

Politically, governments are changing how infrastructure spending is allocated. More taxpayer dollars are being spent on mass transit initiatives such as the City of Calgary’s green line project, which aims to create a new train corridor with the municipal and federal governments guaranteeing a cumulative $3.08 Billion towards the project (“Green Line”, 2016). The implication for the auto industry (including Fix Auto) is that the transit projects aim to reduce emissions by having fewer cars on the road. With fewer cars on the road, the likelihood of collisions and the customer base are reduced

The socio-cultural tendencies of society increasingly are leaning toward an ecological outlook. People work to reduce their adverse environmental impact and many opt out of driving entirely. Environmental awareness has people taking mass transit and walking (or biking) to their destinations, which means less cars are on the road. Society is moving toward more fuel efficient cars that retain value for longer amounts of time. Modern cars are built to last longer and wear out less quickly. Computer technology is now able to optimize everything from gear shifting to lane positioning, and even taking complete control of a vehicle. As a result, parts wear out more slowly and collisions are less frequent. Parallel to the environmental awareness movement, car manufacturers have been working to make the cars themselves lighter in an effort to conserve fuel. The traditional steel and aluminium bodies are being replaced by lighter, plastic, fibreglass, and carbon fiber builds which are not easily as repaired.

Provisions in the law also create issues for Fix Auto. Provincial and federal governments are moving towards carbon taxes, which will hit drivers with higher fuelling prices with the goal of reducing vehicle mileage. In fact, “A $50 carbon tax would drive up pump prices by 11 cents a litre” (Mccarthy & Leblanc, 2016, para. 11).

Strengths in the Fix Auto organization include their branding and rapid ability to expand operations with limited operating costs. Fix Auto is working to create a trusted Auto Service brand in an industry that historically is not credible (CB Staff, 2016, Para. 4). Fix Auto gains a competitive advantages through their provocative campaigns. Rapid worldwide expansion is facilitated through their operation of 229 Canadian locations as well as those in other countries (CB Staff, 2016, Para. 3). The franchise structure enables them to quickly open new shops based on a ‘cookie cutter’ set of procedures. It also places the risks onto the franchisee owners as opposed to the Fix Auto brand themselves. Profit margins are maximized as a result.

Major weaknesses to international expansion are the organizational structure and the command hierarchy. The current organizational structure does not allow for different socio-cultural standards and adaptations for the different regions.

According to the Canadian Business (2016) article, the “Canadian market is actually pretty much rolled up… The U.S., however, still represents a huge opportunity” (CB Staff, Para. 10). This is because unlike the Canadian Auto repair industry, the United States consists primarily of privately owned shops. Many of the shop owners are straining in the attempt to retain profit margins in the current economic environment, creating an opportunity for companies such as Fix Auto.

Through buying out these individual shops, Fix Auto can continue to build its brand and its bargaining power with suppliers. This enables them to pass lower prices on to the customers, building a competitive advantage in the industry and increasing supply chain efficiency. Another opportunity that Fix Auto faces is the advancement of technology. Modern materials make the repair process more complex and expensive, creating an opportunity for established brands such as Fix Auto. The individual repair shops are increasingly unable to compete with established brands such as Fix Auto, and this contributes to the competitive advantage that Fix Auto could potentially establish.

Threats to the Auto Repair industry include government policy, technological advancements and economic struggles. Carbon taxes and public transit spending encourage people to switch to alternate methods of transportation. Fewer drivers means less collisions to repair. Driver error is reduced through new computerization and detection systems. If auto repair companies do not adapt, they lose competitive advantage over companies that do. Finally, fewer people can afford to operate a vehicle in the current economic climate.

The organizational structure of Fix Auto is the primary issue in that it does not accommodate the varying regions of the world. They have one division and a ‘cookie cutter’ approach that works in Canada, but may not be as effective in other countries such as the United States and many parts of Europe. The current organizational structure of Fix Auto is functional with divisions based on the acquisition of Prime CarCare Group, a parent company to 142 franchise locations under a variety of different brands (“Fix Auto to Acquire”, 2016, Para. 1,4; “Fix Auto Canada”, 2016, Para. 1, 3).

Regional Implications

Fix Auto’s current organizational structure is inefficient through their bureaucratic controls and the standardization of rules and operating procedures. A set of guidelines that works in Canada will not work elsewhere. European cities for example, are historically different than North American cities. The rich aristocratic citizens who can afford vehicles, live in different areas of the city. In the United States, the prestigious communities tend to be found in the suburbs, whereas in Europe, the city centers are where you find the wealthy. On top of that, in the United States, the automobile has encouraged people to spread into the outskirts through the diminishing attractiveness of the center for communal activities (Melosi, n.d. Para. 5). Rather than having the North American driving culture, more densely populated regions of the globe rely heavily on public transport, cycling, and walking. This means that the same organizational structure cannot be used effectively worldwide to maximize the global market.

Fix Auto operates in a manner that follows Canadian legislative guidelines which varies by national region. The global presence of Fix Auto creates an inefficiency through the requirement to comply to the laws of several differing countries. Each country has its own unique labour standards, competition regulation, licensing processes and tax codes.

In addition to internal legislation, each country has foreign policy regarding the importation of auto parts. The North American Free Trade Agreement (NAFTA) and the European Union (EU) reduce trade restrictions and tariffs within their respective regions; however, trade between EU and NAFTA countries still have tariffs and taxes. Fix Auto operates in both regions, creating an inefficiency in regards to importing parts for foreign cars. In Europe, taxes are placed on North American car parts and vice versa. The current organizational structure does not effectively take advantage of the trade agreements because Fix Auto is expanding worldwide instead of improving domestic operations in each region.

The national boundaries of Canada are not a confinement for competition guidelines (“Competition Law”, 2013, Role of International Cooperation. Para. 1). Many countries worldwide have slightly different legislation regarding the prevention of monopolies. Due to the rapid expansion of the Fix Auto franchise, they are subject to regulations found in the Canadian Competition Act such as: “the Tribunal shall not find that a merger or proposed merger prevents or lessens, or is likely to prevent or lessen, competition substantially solely on the basis of evidence of concentration or market share” (Canadian Competition, Sec. 92(2)). The Competition Act ensures that monopolies do not occur through expansion, merger or sale of a company. An example of the Competition Bureau becoming involved with the enforcement of competition regulation occurred in 2013, when Sobeys acquired Safeway and was forced to sell 23 of their locations to meet competition requirements (“Competition Bureau Statement”, 2013, Para. 2). Fix Auto needs to meet similar obligations in regards to their expansion.

Wrong Expansion Objectives

While Fix Auto now has expanded operations into Australia and South Africa, (“Fix Auto Launching”, 2016, Para. 1; “Fix Auto South”, 2016, Para. 2) they are far from completely developing the North American market. Even in Canada, Fix Auto operates no locations in many provinces and territories such as Manitoba and Saskatchewan. On top of this, they are failing to test markets before entering. Fix Auto risks following in the failed footsteps of Target, in that they are moving into new markets with more investment than would be advisable (Dahlhoff, 2015, Para. 5)

There are two feasible solutions to the inefficiencies that Fix Auto is experiencing as a result of their uncontrolled global expansion.

The first solution for Fix Auto should be to divide its organizational structure into regions. Independent management for different regions rather than worldwide control in Montreal. Organizations with strategy based on region tend to perform more efficiently and effectively than global orientated strategies (Ghemawat, 2005, Para. 2). Fix Auto should adopt a hub strategy, where they open regional offices and operate the regions like individual companies (Ghemawat, 2005, the Hub Strategy.). Locations in European should report to a separate European administration instead of the one based in Montreal. This allows the European operations of the company to operate more efficiently because Fix Auto would be able to employ regional presidents who know the local legislation of the country or region. Larger countries such as Canada and the United States should also be divided into regions. The United States could be divided into three regions (Pacific, Midwest, and Atlantic) with potential hubs in San Diego, Omaha and Atlanta. Similarly, they should divide Canada into regions (East and West) with potential hubs in Calgary and the existing one in Montreal.

Fix Auto should slow expansion into new countries and paying unnecessary premiums when there is still room to expand in existing markets. It is mentioned earlier that there are no locations in Saskatchewan, Manitoba and much of their target market in the United States. Fix Auto needs to focus on their primary objective of becoming the North American auto body repair chain. Fix Auto is experiencing overexpansion. “Overexpansion often occurs when business owners confuse success with how fast they can expand their business” (Schaefer, 2006, Overexpansion. Para. 1). In a 2005 study done by the Law School at the University of Chicago, it was found that of the Chapter 11 Small Business Bankruptcies issued in the United States, overexpansion contributed to a “non-trivial” (Baird & Morrison, 2005, Pg. 7, Para. 1) number of cases. The best method for expansion is steadily and to move to new countries one at a time. (Schaefer, 2006, Overexpansion. Para. 1). Fix Auto should capitalize on their existing regions such as the United States, Canada, and the United Kingdom before moving into new markets such as Australia, South Africa and Turkey.

If Fix Auto desires to maximize corporate efficiency, they need to begin operating the differing regions as separate divisions with unique management and hubs. This way, each region is able to have expertise in local legislation and cultural standards. They need to implement regional strategies, offices, and management before opening branches in new countries and global regions.

In conclusion, while Fix Auto is rapidly expanding into new regions, their organizational structure fails to accommodate for regional differences and as a result, there are inefficiencies in the company.

Early morning frost coated my every breath as the stepladder slipped out from under me and I came tumbling down onto the cold pavement. Most of a gallon of paint coated me, the grass, and the concrete steps leading up to the house. Adrenaline rushed through me as my crew – a couple new hires came rushing over to check on me.

The client – a well respected Calgary realtor – had just left for work and I had assured him that everything would go smoothly. This was one of my first ever painting projects so I had a point to prove.

I hurried off to the nearby Safeway to purchase some products to remove the paint from the steps. When I returned, I noticed that my crew was missing and I began to wonder where they were. It turns out that they decided to grab a 9:00am lunch at the local Subway.

Later that day, I splattered more paint onto the stucco house – and I spent hours trying to do a colour match to the stucco.

This day could not go any worse! I was discouraged, and I began to question my ability as a manager. I had spent a weekend in Edmonton training with others from my company, and already had training on an interior and an exterior project the month prior.

This day could not go any worse! I was discouraged, and I began to question my ability as a manager.

Timothy J. Tetreault

Here is why I believe that every student should run their own painting company:

You Learn Patience

“Patience is bitter, but its fruit is sweet”

Aristotle

Starting out in student painting taught me a lot of techniques to keeping composure and handling issues. It threw me into the industry with little life or industry experience.

I started working back in highschool as a courtesy clerk for Sobey’s (Canadian grocery store). My job description was to push shopping carts back into the store after customers were finished as well as bagging groceries. Within three years, I was working as a cashier, and there was talk among the upper ranks of putting me in a supervisory position. One day, I walked into my political science class, and found a flyer sitting there: “Manage your own company this summer.” I applied, interviewed, and got the job!

After training, I figured that I had to hit the ground running. I had ~$10,000 saved up in my government Tax Free Savings Account (TFSA) account, and I began shopping for a vehicle to run my business from.

I wasn’t going to allow my lack of a vehicle to stop me right away however. The dealership where I eventually purchased my 2011 GMC Sierra is located nearby the location that I wanted to start my cold calling.

Cold calling is the best way to find new clients for your business. That is what I was told during training – but historically I have been very shy. In order to be successful in this industry meant that I had to step outside of my comfort zone.

I started knocking on doors in my neighborhood, and learned very quickly that this would require more patience than I had anticipated. The first homeowner essentially told me to “get lost” – and slammed the door in my face. The second, third, and forth ones weren’t home. The fifth one told me that she was interested, but then when I went to call her, I realized the phone number she had given was a fake.

I was discouraged, and by the time I had reached the end of the street, I was ready to pack it in for the night.

I started to walk back to my car (a 2004 Chevy Cavalier) parked at the start of the street. There is a highschool and a field on this particular street, so I assumed that It would not be worth my time to knock on the few houses beside the school. I had left a sign out on the side of the road, and one of those residents – an elderly woman approached me as I got near my car.

The elderly woman explained to me that she was doing some gardening that week and had noticed that both her fence, and her window frames had begin to peel and she asked if I could give her a price on repainting those areas. I was astonished; hours of looking for prospective clients with no results, and just when I am ready to give up – one appears!

I did the quote (later I would learn that it was a bit low), and Dorothy signed on the spot, becoming my first ever client!

Before I left, I decided to knock on the doors of her 5 neighbors. The first two were not home. I left that evening with 3 more leads from those houses (1 would eventually sign – a living room and kitchen interior).

I realized that day that cold calling follows the rules outlined in the law of averages. The law of averages essentially states that any particular outcome (regardless of odds; provided that it is greater than 0%) is inevitable given a large enough sample size.

In my experience that day, I realized that while doing cold calling, you cannot be discouraged when 100 people turn you away, because the 101th, 102nd, and 103rd doors that you knock could be the job that you end up signing.

I realized that the Law of Averages transfers into other areas of life as well:

If you are single, you need to meet many different people in order to find somebody compatible. This may require several bad dates, but then eventually one good one will happen.

If you are a highschool graduate applying to a university, you apply to many universities to increase your chances of being admitted.

When gambling, it is inevitable that you will win any particular game if you play it enough times. In this case, the law of averages is a major driver in gambling addictions

Doing student painting you also learn how to remain calm and composed when the client may not be. I have people take frustrations out on me, and get angry towards me, and view me as nothing more than their pawn. Being a student painter, many clients assume that you are inexperienced, and that they are smarter than you. At first this behaviour got under my skin, but I learned not to take it personally. I learned that just because a particular client is upset about a matter, they are generally still willing to speak to you and find ways to resolve the issue.

Patience is an important trait to have in day to day life because it helps people deal with conflict, and it can also improve a person’s work ethic.

You Learn Sales Techniques

If you had approached me five years ago and told me that I would become an excellent salesman, I would have chuckled and told you “yeah right.”

Student painting has allowed me to learn first hand the importance of different sales techniques.

Fortunately I learned patience early on – it is an important trait to have when it comes to sales. I learned that when making a sale, the client will usually have objections. I started viewing these objections as an opportunity as opposed to the client not being interested. I am now able to use the objection to help make a sale and build value in a client’s life.

Student painting is historically known as being a summer job for students to help pay for textbooks (think Tom Sawyer), but in actuality – it is so much more. Students run legitimate businesses, and like any business, the goal is to grow and provide as much value to clients as possible.

I would argue that aside from extremely difficult projects, the quality that a student is able to achieve is comparable to professional and more established painting businesses.

Students are often flexible in their scheduling because the crews do not generally have children, or dependent families. This means that a student painting company can more easily accommodate for evening scheduling, or other client needs.

For example, here are some popular objections that I received and how I learned to address them:

Objection

Response

“It is a bit expensive”

Price based selling: “where do you need the price to be in order to move ahead with this project.”

Value based selling: “Is the price high based on your budget for this project, or based on the value we present.”

“I need to talk to my husband/wife”

“If your husband/wife is comfortable moving ahead with this job, would you also be comfortable with getting this work done?”

“I need to get a few other quotes first”

“Absolutely, we always recommend doing that to ensure that you are getting the fairest price. If you have any questions about my proposal or it is unclear, my number is at the bottom. Don’t hesitate to call, and I will do my best to make this work for you!”

By running a student painting business, I tried different sales tactics, and built value in different ways. Some techniques worked very well (and I implemented those) and others did not so much. I have tried fancy closing statements only to find myself tripping over my own words and dramatically faceplanting right back to knocking on more doors.

You Learn Marketing

In our world, marketing is everywhere. This was one of the biggest challenges starting out and was very demotivating. How was I supposed to compete as the new guy in an already saturated market. Most of my competition have made careers in painting, and here I was as the student. There were other students running businesses as well, but this made my niche market not as formidible.

In student painting, the primary target demographic is seniors. This is because seniors generally require assistance on labour based jobs, and they support young people getting an education. Often times, seniors have disposable income, but generally spent most of their lives in the middle-class demographic so they often are price sensitive.

In Canada, seniors are a fraction of the total market however, so I had to share this demographic with other student painting companies. Generally, seniors tended to choose student painting over professional painters, and the professional painters tend to stick with newer builds and larger projects.

I began searching for a more specific market niche to build my business around. Student residential painting was somewhat saturated, so I began looking towards commercial painting. Residential painting is much more abundant, but commercial painting jobs tend to be larger and focus less on detail. They tend to paint buildings with a more practical intent – to protect the surfaces from weathering and damage.

Soon after searching for commercial jobs, I found several interested customers. The first one I signed – a 3 story office building in downtown Calgary, ended up being my last project of that season. The job value was just shy of $6000, which was about 2.5x my average residential job size. The next spring, I continued to market to commercial businesses and ended up painting a brick wall (see photo) in downtown Cochrane on the back of a hair salon. I also did quotes on the Cochrane Golf Club and various businesses within Calgary including a Pizza Hut and an office complex just outside of the core.

Cochrane Project – Before

Cochrane Project – After

I learned very quickly the importance of brand awareness and ensuring that your logo gets seen often. I began to incorporate flyer delivery in my routine cold calling activities and I tracked the results. I cold called 250 houses without delivering any flyers and left with 13 leads. A week later I cold called another 250 houses in the same neighborhood, and ended up with 23 leads – a 77% increase.

Facebook was one of the avenues that I experimented with, but I did not see any results until I tailored my message a bit. At first, I used a Facebook marketing campaign to drive leads, but I found that my impressions to click through rate was very low. Instead I began to focus my marketing and paid to sponsor advertisements about a day after I flyer a particular region. This helped dramatically in signing jobs and creating a brand awareness.

Once I bought my truck, I realized that I was driving a potential marketing machine! I purchased some vehicle magnets from our head office in Halifax, and I got to work carving the magnets up work with my chrome trim package. By the time I was finished, I was probably one of the most recognizable vehicles in Calgary. And it worked! Calls began to pour in throughout the regions of the city that I frequented, and just seeing the truck made our brand recognizable

Referrals became my best marketing. At the end of the season, I had stopped door to door marketing, and flyering entirely and I operated my business off of referrals. Clients from earlier in the year shared the amazing projects that I completed, and new clients poured in. I ended up signing the biggest project of my life towards the end of the season from a referral. It was a full exterior of a luxury home near Calgary. This project alone ended up covering my expenses through the fall and winter.

Working for somebody else, you always question why some managers crack down on customer service so hard. As a business owner, you learn that projects are easier when the client is happy, and you find other projects fairly easily.

You Learn Human Resources

Most students are working for other people outside of their educations, and the issue with this is that it only teaches you one side of the equation.

There are a lot of people in the workforce that have no idea how to manage a team – let alone recruit, train, and fire. I have worked various other jobs as an employee since leaving student painting, but they all handle human resources very similarly.

A company’s employees are arguably the most important resource, and an effective manager is able to utilize them to ensure that all goals get met. an effective human resource program will motivate employees to meet organizational goals, it will discipline employees that fail to meet these goals, and it will encourage healthy working environments.

As a result, human resources are one of the most important aspects to running any business – making these skills transferable outside of student painting.

I learned a lot of human resource skills the hard way. I was destined for issues from day 1. My first employee that I had hired was my best friend of 12 years at the time.

Him and I grew up together, and we knew each other very well. He was unemployed, and I was looking for employees so it seemed logical at the time to hire him. I ended up also hiring three other friends of mine. I had set myself up perfectly to have human resource issues.

The issue with hiring friends is that it can come between the friendship. Discipline is nearly impossible when the employee does not view you as their manager – and an attempt to discipline will look bad on the manager. Hiring a friend also leads to motivation issues because they will see first hand that they are making $15/hr ($120/day) for working hard on a jobsite while you will pocket an average of $300-500 on that same job without touching a paint brush. This puts some tension in the friendship.

My second year student painting, I made another mistake. I decided in the spring to hire my girlfriend (now ex). She had just finished upgrading her high school, and was on the search for a full time job. We had been dating 3-4 months by this point, and I figured it was safe to offer her a job. I thought I had learned my lesson in the year prior, but apparently love clouds your judgement.

At first things were great, but I later learned that the work dynamic is part of what killed our relationship. Relationships function well when there is equal respect for each other. The boss-employee dynamic found its way into our relationship and it was difficult to separate the personal relationship from the professional one. I really enjoyed working alongside my girlfriend, but it was near impossible to address any issues while keeping it outside the personal relationship.

For example, she was super friendly (and clients really liked having her around), but she was a slow painter. I had talked with her numerous times about her speed, but I did so in a professional manner. I talked to her the same as I would any other employee. I believe that she expected me to talk to her as her boyfriend on jobsites, and this built some tension working together. The other employees also came to me and pointed out that they believed that I treated her differently than them – girlfriend privilege. We ended up breaking up shortly after the painting season had ended and I had closed the company, but I learned a valuable lesson from it: do not hire people you care about if you are the direct line of contact.

I could see working with a friend/significant other going smoothly if:

You are both equal in ranking

You are both in different departments from each other and nobody has authority over another

You met in a working environment, and have developed a mutual respect for each other.

Discipline is also a fundamental component of human resources. When it is done properly, you can redirect undesirable behavior to change it into productive behavior. When done incorrectly, it can actually harm productivity and lead to high employee turnover and demotivated employees.

Early on, I had never managed a team before. I was a cashier at Sobeys, and never actually had any employees reporting to me. As a result, my discipline style early on was either non-existent, or aggressive. I didn’t want to enforce the company policies out of fear of what the employee may think of me. When I occasionally did try to correct behavior I did so in the wrong ways. I would tell the employee that their behavior is undesirable without coaching them methods to resolve the issue.

I eventually learned that employees actually respect managers more for pointing out issues and coaching them to improve. If a person is willing to take the time out of their day for someone else, then it shows that they matter to the company. I learned patience when dealing with problems, and I began to build trust among my employees – and got better quality results to show for it.

Lastly, I learned how to be able to motivate other people. I learned how to make them feel like they are an important part to a bigger goal. I learned how to make every employee feel valued in my organization.

Summary

Since doing student painting, I have learned patience, sales, marketing, human resources, and just generally how to provide a better customer experience. I have tried many different techniques, sometimes failed, and tried other things and succeeded. I have learned how to manage a jobsite and a team of employees.

These skills have transferred into other areas of my life. I can now present with confidence, and I have had many opportunities open up as a result of my knowledge.

I still have a lot to learn, but compared to others my age, student painting has put me miles ahead of any of them.

This is why I believe that every student should run a painting business at some point of their academic career.